When Mrs M came to us with a large estate, she had conflicting wishes. She wanted to support her grandchildren; yet she also had a desire to help poor children having struggled with poverty herself. We helped her to make a plan that reconciled both aims. The result not only provided for her family but also gave her a strong sense of purpose.
It’s tempting to put off planning how to pass on your wealth. After all, it’s hard to accept your mortality and to consider what will happen when you die. There are also difficult decisions to make that might involve relationships with your children and the rest of the family. Indeed, who inherits what can be a source of discord that you want to avoid.
Can you be fair to all members of the family? Should your wealth be split between family members and the charitable causes you care about? Planning for passing on your wealth involves hard choices that will define your legacy and how you are remembered.
Yet for all the difficulties it pays to get started as early as you can, and the New Year is a good time to do so. Refreshed after the quiet holiday period, you can weigh up tough emotional and practical issues. You can consider your wishes, your passions and ambitions. Writing out answers to the following five questions can provide clarity: an important first step before seeking advice.
1. Do I have enough today for tomorrow?
Your financial security comes first. Before you think about passing on your wealth, you need to be confident that you have planned to meet your own long-term needs, including later life care. Your lifestyle and state of health will influence how much money you need.
2. Am I happy to give some wealth away now?
If you decide to make a gift, be aware that the money or assets no longer belong to you, and you cannot control what your heirs do with them. Are you confident handing over some of your wealth, no matter what happens next? You can’t always tell what your heirs might do.
3. Who, when and how much?
Who do you want your heirs to be? When do you want to pass on wealth to them? And how much do you want to give? These aren’t always simple questions to answer. You can choose to pass on wealth in a way that suits you. Through regular gifts, for instance, you get the pleasure of seeing the benefits to the people and causes you care about.
4. Do I want to keep control over some assets?
You can keep some control over assets that you pass on through a trust. In this way, you determine when and how the next generation benefits from assets and money. For instance, you can hold assets in a trust until your children reach a suitable age to inherit.
5. Should I talk to my heirs about my plans?
Many clients like to involve their families when making plans in order to find out what will help them most – for example repaying debt, paying for education or contributing to retirement saving. It might not be easy to talk to your loved ones about money, legacy and what happens after you’ve gone. But these conversations have positive outcomes – whether that’s protecting wealth, supporting charitable causes or putting mutually agreed succession plans in place. Talking together now makes everyone clear about what comes next.
Answering these questions helps you to put specific plans in place for passing on your wealth. Your first step is to make sure you have an up-to-date Will that reflects your wishes. Without a Will, there’s a risk that your estate may neither be distributed as you would like nor be tax efficient.
Naturally, you will want to pass on as much wealth as possible to your loved ones and favourite charities. Inheritance taxes vary depending on where you live, but sensible estate planning can reduce the tax liability on your estate. In many countries, there is a range of tools for passing on wealth – including gifts, tax efficient investments, trusts and pension contributions
Just as we did with Mrs M, we can help you to explore the options and put plans in place to the benefit of everyone. While deciding what will happen after your death might involving hard emotional choices, it’s a positive thing to do. Making informed plans jointly with your family is empowering and can give you a lot of pleasure.
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